Green Exchange to Start California Carbon Futures in September

Green Exchange LLC, the second- biggest emission exchange by open interest in European permits, will offer futures contracts for Californian carbon allowances starting Sept. 11.

The New York-based exchange will list California futures contracts for delivery in December in 2012, 2013 and 2014, the exchange said today in an e-mailed statement. Green Exchange is owned by a group that includes CME Group Inc. (CME), which oversees the New York Mercantile Exchange.

“California will be the world’s second-largest carbon market and we intend to play a major role in its development,” Tom Lewis, chief executive officer of Green Exchange, said in the statement. The new contract “complements our existing range of environmental derivatives,” he said.

California’s Air Resources Board is preparing to start an emissions-trading system in January 2013. The start was delayed by a year after a legal challenge.

The delay “would not affect the stringency of the program or change the amount of emission reductions that the program will achieve,” Mary Nichols, chairman of the California ARB, said on June 29. The state’s 2006 climate change law aims to cut California’s greenhouse gas emissions to 1990 levels by 2020.

Cap and Trade

California’s cap-and-trade program was approved in December and will be the first mandatory regulation of its kind in the U.S. It aims to reduce emissions from power plants, refineries and other polluting industries by about 15 percent by 2020 by creating tradable allowances for emitting carbon dioxide. Emission limits will be enforced by decreasing the number of allowances over time.

Green Exchange was founded by a group of banks, brokers and trading companies including Goldman Sachs, Credit Suisse Energy, Morgan Stanley (MS), RNK Capital, Spectron Energy, Vitol Group and Tudor Investment Corp. The exchange currently offers futures contracts for EU emissions allowances and UN carbon credits. Clearing of all trades will be carried out by CME Clearing.

Green Exchange is the second-biggest carbon exchange after ICE Futures Europe, based in London.

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